Not just the noodle seller, why are many large businesses also afraid to become enterprises?

To promote household businesses to become enterprises, many solutions are needed to "clear space in advance" so that they voluntarily move up rather than forcing them to wear an unsuitable coat.

Although accounting for a large number, the individual business household sector is still considered an informal sector - Photo: QUANG DINH

The economic restructuring plan aims to reach about 1.5 million businesses by 2025, but up to this point most experts say it is "difficult to achieve".

According to the 2024 Vietnam Enterprise White Book, the country has 921,372 operating enterprises, an increase of 2.8% compared to 2022. However, by 2024, the number of newly established enterprises as well as the capital scale will tend to decrease.

To increase the number of businesses, upgrading the individual business model to a more professional one is a solution, but it is not simple.

2017	654633
2018	714755
2019	758610
2020	811538
2021	857551
2022	895876
2023	921372

Data: Business White Paper

Household businesses avoid, number of enterprises difficult to increase

Talking to Tuoi Tre Online , Mr. Le Duy Binh - economic expert, director of Economica Vietnam, said there are many reasons why business households are afraid to become enterprises.

The biggest problem, in Mr. Binh’s opinion, is the outdated regulations and concepts of private enterprises in the Enterprise Law. This type of enterprise is becoming less and less attractive and is not considered a suitable, low-cost choice for individuals when starting a business.

According to data from the General Statistics Office, in the period 2011-2021, there were 940,000 business households in operation. In contrast to this impressive increase, only 43,800 private enterprises were registered, equivalent to 4.6% of the number of business households established and operating in this period.

The expert further emphasized that separating regulations on business entities and business individuals is an important principle that has been applied by many countries, especially OECD countries or East Asian economies such as Japan, Korea and ASEAN.

Mr. Binh and many experts agree that the provisions of the Enterprise Law as well as in many other current legal documents make the compliance costs for individuals doing business under the private enterprise model "too much to bear" for them. This prevents them from registering and converting into private enterprises.

"These costs come from current regulations on business registration, requirements on headquarters, accounting regimes, financial reporting, taxes, labor, and social insurance," Mr. Le Duy Binh pointed out.

An expert who used to work at the CIEM Institute (now the Institute for Policy and Strategy Research) said that many business households are "noodle sellers, pho sellers"... Even though they have a brand, a large number of customers, and manage many employees, they do not have the need to upgrade to a business because they are afraid of the procedures and costs.

Many business households say they only pay a few million VND in taxes per month and are not worried about being inspected and examined as much as enterprises.

The expert said that no one wants to be small in business, "growing" will increase prestige and create more opportunities, but they are afraid of the constraints of the "forest" of procedures that do not distinguish between large and small. In addition, according to this expert, there are many businesses with large revenues, paying lump-sum tax makes them "breathe easier" than settling taxes in the form of enterprises.

What is the solution?

Mr. Le Duy Binh said that the current Enterprise Law has regulations on private enterprises, which are essentially individual enterprises or sole proprietorships.

However, the expert said, the best scenario would be to amend the law by renewing the regulations related to private enterprises to create a legal corridor in this law for individual enterprises or sole proprietorships. The remaining regulations are for other types of business entities such as LLCs and joint stock companies.

Accordingly, the individual or single-owner business model will have low operating costs, convenience, and ease for those who are currently choosing the business household form.

"We need to clear space first so that businesses can voluntarily move up rather than forcing them to wear a coat that is not suitable for them," said Mr. Binh.

Meanwhile, a business environment expert suggested that better and tighter tax management would encourage business households that want to "avoid" becoming enterprises to continue paying lump-sum taxes.

According to a report from the ILO, there are about 5 million business households in the country. However, according to the business registration offices of district-level People's Committees and tax authorities, only 1.7 million businesses are registered and pay tax - contributing about 1.6% to the state budget. This means that 3.3 million business households are still unregistered.

The above figures show a significant difference between the number of operating business households according to the General Statistics Office and the number of business households registered with local authorities.

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Source: https://tuoitre.vn/dau-chi-ba-ban-bun-vi-sao-nhieu-ho-kinh-doanh-lon-cung-ngai-len-doanh-nghiep-20250315172137021.htm